USA oil giant Chevron says will acquire Anadarko for $33 billion

Kenny Grant
April 15, 2019

Chevron Corp agreed to buy Anadarko Petroleum Corp in a US$33 billion bet on the Permian shale-oil region and liquefied natural gas, intensifying a battle with Exxon Mobil Corp to be America's top energy company.

The deal comes as oil majors like Exxon Mobil look to carve out a dominant position in the Permian basin, the largest USA shale field and the driver of a boom in American oil production.

"Chevron now joins the ranks of the ultramajors", Roy Martin, an analyst at Wood Mackenzie Ltd., said in a note. "The acquisition makes the majors' peer group much more polarized". Kaizen Advisory LLC now owns 1,390 shares of the oil and gas development company's stock valued at $61,000 after purchasing an additional 271 shares during the period.

That is largely being driven by the energy powerhouse Saudi Arabia, which last month removed another 324,000 barrels of oil per day from the market. The company has a market capitalization of $23.38 billion, a price-to-earnings ratio of 27.34, a PEG ratio of 2.33 and a beta of 1.55.

Chevron CEO Mike Wirth stated in an interview to CNBC that the project should proceed as planned. Chevron also expects shale to generate profits for its pipeline, trading and refining units.

Chevron's pledge to restrain expenditures has made it a favorite among energy stocks, with its shares up 13.8 percent this year. Chevron will also take over Anadarko's 15 $bn debt.

Chevron (NYSE:) agreed to pay $65 per Anadarko (NYSE:) share in stock and cash, sending Anadarko's shares up almost 33%.

Pioneer, Concho and Parsley shares rose 11.5 percent, 8.8 percent and 11.7 percent respectively on Friday following the announcement of the sale of Anadarko, amid investor speculation over who the next takeover target will be. The combined company's cash flow previous year, US$36.5 billion, would have exceeded Exxon's.

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The deal announced Friday comes with USA crude prices up 40% this year and vaults Chevron into a new league.

Chevron, Exxon, Royal Dutch Shell Plc and BP Plc largely missed out on the first phase of the shale bonanza, when more nimble independent producers such as Anadarko pioneered shale drilling technology and leased Permian acreage on the cheap.

Chevron, which already has 2.3 million acres in the Permian Basin, said the deal to buy Anadarko would give the combined company a 75-mile (120-km)-wide corridor across the Permian's DE basin, on the Texas-New Mexico border.

Furthermore, Chevron will be able to access Anadarko's pipeline and processing infrastructure in Texas and the Western US, and to their offshore facilities in the Gulf. "Chevron is taking advantage of that", Flynn said.

Expanding Shale Operations Further: Anadarko is the biggest upstream player in Colorado's DJ Basin and has attractive assets in the Delaware Basin in Texas. The purchase makes Chevron the top producer in the Permian Basin, the largest US shale field. It still needs approval from shareholders of Anadarko Petroleum Corp. and regulators. Expenses from that project are expected to reach $4 billion over several years. The merger will create an oil-production powerhouse boasting a total enterprise value of about $50 billion.

"This deal seems ideal".

They include oil and gas exploration and production, crude oil and natural gas transports; refining and products marketing and distribution; transportation fuels and lubricants; manufacturing and sale of petrochemicals and additives as well as power generation. Finally, Barclays cut shares of Occidental Petroleum from an "overweight" rating to an "underweight" rating and decreased their target price for the stock from $77.00 to $70.00 in a report on Friday, February 15th.

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